Answer:
1. In the short run, wages and other prices are stagnant making the economy to run below or above the normal level. In the long run, wages and prices are fully flexible, and this allows the economy to run at its natural level.
2. This distinction is important because it helps us to see how difficult it could be to sustain the real gross domestic product and employment rates thus making the economy to run at a normal level or achieve its full potentials.
Explanation:
Stickiness or stagnancy of wages can be seen in the fact that it is most time difficult to fluctuate or change the wages of workers overtime. The prices of most goods are also sticky when they remain unchanged over a given period of time. These conditions exist in the short run, and make the economy to run above or below its full potentials. The real GDP and unemployment levels are negatively affected.
In the long run, flexibility of wages and prices are achieved and this makes the economy to run at its full potentials. The real GDP as well as the employment rate are at their optimum level then.
If this is a true or false statement, then true.
Answer:
d) all of the above.
Explanation:
All of the above statement correspond to different definitions of demand that economists use on a daily base.
Statement A) refers to aggregate demand, which is roughly equivalent to GDP.
Statement A.2) refers to demand schedule, which is also simply referred to as demand in the press, or in informal contexts.
Statement B) refers to an equilibrium quantity demanded, which occurs when supply and demand meet under an equilibrium price.
Statement C) refers to quantity demanded because it is not always relevant, when talking about demand, whether the good demanded is a necessity or a luxury.
